'Big returns' to be had in Saudi market - Merrill Lynch

There are “substantial returns” to be had in the Saudi market between now and the end of the year, Merrill Lynch said on Tuesday.

Concerns over the fallout of the conflict between Saad Group and Algosaibi (AHAB) have weighed on the Saudi market and could be the reason it has lagged a rally in BRIC markets, a team of analysts wrote.

But with greater clarity of the implications of the scandal, stocks in the largest Arab economy should play catch up.

“Credit growth is likely to be subdued in the near term as a result of ongoing concerns about merchant families’ debt problems. Still, with little leverage and plentiful savings Saudi is in a good position to handle any likely contingency,” the investment bank said.

Going into next year, Saudi stocks will maintain their upward momentum on the back of rising oil prices, which may touch $82 per barrel in the fourth quarter of 2010.

Continued government investment to diversify the economy and create employment for the Kingdom’s burgeoning young population will underpin growth in the country’s non-oil sectors.

“Abundant oil wealth is not the main reason we like Saudi macro story but of course it definitely helps,” Merrill said.

The bank’s top Saudi stock picks are dairy concern Almarai, Arab National Bank (ANB), petrochemicals giant SABIC and Saudi Telecom Company (STC).

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